Obama's budget: huge ambitions, huge obstacles

February 28, 2009 11:49:20 AM PST

WASHINGTON --

Breathtaking in its scope and ambition, President Barack Obama's agenda for the economy, health care and energy now goes to a Congress unaccustomed to resolving knotty issues and buffeted by powerful interests that oppose parts of his plan. Perhaps the only things as high as Obama's goals are the hurdles they must clear.

While tackling the economic crisis, he is asking Congress to enact contentious measures that have been debated, but not decided, in calmer times: cut subsidies for big farms; combat global warming with a pollution tax on industries; raise taxes on the wealthy; make big changes to health care, including lower reimbursements for Medicare and Medicaid treatments and prescription drugs.

Standing alone, any one of these proposals would trigger a brawl in Congress and fierce debates outside Washington. Obama wants the proposals done largely in concert, as an interrelated plan to undo major elements of Ronald Reagan's conservative movement.

Obama outlined the approach in a budget proposal Thursday, a sprawling road map that will require several hard-fought pieces of legislation.

He launched his campaign for the package Saturday with a fiery, populist radio and Internet address that depicted his critics as champions of "the interests of powerful lobbyists" and "the wealthiest few."

"I realize that passing this budget won't be easy," the president said, because it "represents a threat to the status quo in Washington."

"They're gearing up for a fight," he said. "So am I."

If his rhetoric was tough, the challenges he faces are downright daunting. The economy contracted by a stunning 6.2 percent in the final three months of 2008, its worst showing in a quarter-century.

Obama says the crisis calls for gutsy actions, and many groups feel he has delivered.

"We're struck with how bold and courageous a budget it is," said James Horney of the liberal Center on Budget and Policy Priorities, which supports the president. "There are a whole lot of things that are going to be extremely difficult because there are very powerful vested interests out there that will fight them."

Obama is not simply proposing a budget that assumes a jaw-dropping deficit of $1.75 trillion this year, a quadruple increase from the year before. He's trying to redirect strong currents in American society.

The wealthiest 5 percent would pay a whopping $1 trillion in higher taxes over the next decade, while most others would get tax cuts. Industries would buy and trade permits to emit heat-trapping gases. Higher-income older people would pay more for Medicare benefits. Drug companies would receive smaller profits from the government. Banks would play a much smaller role in student loans.

Obama's climb is steep. Even with solid Democratic majorities in the House and Senate, he secured a $787 billion stimulus package only after accepting compromises that irked liberals but won the support of three Republican senators.

Not a single House Republican backed it. Judging from House GOP leaders' immediate condemnation of his budget blueprint, Obama can expect more of the same.

More troubling for him, however, are the divisions quickly emerging among Democratic, liberal and centrist constituencies that either backed the stimulus or stayed on the sidelines.

Sen. Arlen Specter of Pennsylvania, one of the stimulus bill's three Republican backers, said it is hard to see how Obama can meet his new deficit-reduction targets. He called Obama's chief energy proposal "entirely speculative" and urged the president "to forgo the tax increases" in the plan.

The U.S. Chamber of Commerce, which also backed the stimulus bill, said Obama's budget blueprint "appears to move in exactly the wrong direction. More taxes, heavy-handed regulations, and command-and-control government will not hasten recovery... You don't build a house by blowing up its foundation."

That sounded like a jab at Obama, who said Thursday: "There are times when you can afford to redecorate your house, and there are times when you have to focus on rebuilding its foundation."

Some Washington veterans say that if anyone can overcome the hurdles, it is Obama.

"He has such enormous popularity right now," said Scott Lilly, who spent 31 years as a congressional aide before joining the liberal-leaning Center for American Progress.

Obama's political gifts are extraordinary, Lilly said. No one expects the president to get everything he's asking for, he said, "but I think he could get a big share of it."

Pushing his tax and health proposals through the Senate Finance Committee "is going to be one hell of a fight," Lilly said. The committee chairman, Sen. Max Baucus of Montana, sometimes parts ways with Democratic leaders on important issues such as tax cuts and Medicare.

Stiff resistance awaits Obama at almost every turn.

"Class warfare" is how Republicans label his plan to raise taxes, starting in 2011, on households making more than $250,000 a year.

Some liberal-leaning foundations are unhappy about his proposed reduction in the tax deductibility of gifts to charity from wealthy people.

On health care, Obama wants to cut payments for Medicare and Medicaid, the government programs for the elderly, disabled and poor. Taking hits would be insurance companies, home health services, hospitals and drug manufacturers, all of which are powerful lobbies in Washington.

On energy, Obama wants to reduce greenhouse gases and raise money for clean-fuel technologies, such as solar and wind power, by auctioning off carbon pollution permits. The proposal, known as cap and trade, will lead to a bruising fight in Congress, which may be divided more by region than party.

William Kovacs, who oversees regulatory affairs for the U.S.

Chamber of Commerce, says Obama is pushing too fast for such a dramatic policy change.

"Any support that there was for cap and trade from the business community," he said, was based on the assumption of "a long-term transition."

Some government veterans, however, think doubters are underestimating Americans' hunger for change. For example, every individual and institution is hurt by the ever-rising cost of health care, and many are ready to shake up the system to make it less expensive, said Bruce Reed, who oversaw domestic policy in Bill Clinton's White House.

"The country wants it, the economy needs it, businesses large and small know that they can't afford not to have it," said Reed, who now heads the Democratic Leadership Council, a center-left group. "I don't think a do-nothing caucus will get anywhere on health care."

Reed added, however: "Health care has always been the Middle East of domestic policy."

On energy, he said, "Congress ought to be able to pass a cap and trade bill. The rest of the industrialized world is doing emissions trading. A broad swath of American industry wants this question to be answered."

The president's agenda is vast and ambitious, Reed said, but the times call for it. After all, he said, "Obama didn't have the luxury of saying, 'I'll handle the economic crisis and then get back to you on the rest of America's future."'